Geoffrey HalePolitical Science 3170

The University of LethbridgeOctober 21, 2010

OutlineWhat are supply (and value) chains?Supply chains and structural economic change

Supply ChainsSupply chains

the series of value-adding service, processes, information and financial flows that generates final products and distributes them to end users (Stanley).

supply chains involve the management of logistics requiring the integration of information, transportation, inventory, warehosing and materials handling systems. Inbound logistics – involves the transportation and warehousing of raw

materials and components until needed for manufacturing or processing;

Outbound logistics – involves the warehousing and distribution of intermediate and/or finished goods.

Supply chains and economic integrationThe evolution of supply chains reflects both policy changes by

governments and broader changes in forms of economic and market organization

Policy ChangesPursuit of greater specialization of firms through reduction of trade

barriers, extension of trade agreements Increased productivity of freight transportation systems through

economic deregulation (elimination of rate regulation, barriers to entry) and greater competition

Result: increased decentralization of production and distribution systems through business networks of related and arms-length firms.

Supply chains and economic integrationMajor enabling changes in business environment

Information Technology Revolution Clusters of technologies facilitating information management and

sharing, including inventory, production and distribution control systems e.g. Bar Codes, point-of-sale/distribution inventory management,

tracking of goods shipments, standardization of customs processes, etc. Facilitates “just-in-time” inventory and production systems, global

sourcing and distribution of components and products.

Supply chains and economic integrationMajor enabling changes in business environment

Containerization Intermodal integration of maritime, rail and truck freight networks Widespread development of private freight terminals Intermodal traffic (US) – 1980: 3 mm.; 1990: 6 mm.; 2006: 12 mm.

Global integration of supply chains Rapid growth of Chinese, East Asian container traffic since 1990

Expansion of North American distribution networks Consolidation of Class I Railways across North America

40 in 1980; 7 in 2006 (> $US 346 mm. Revenue), including US subsidiaries of Canadian National, Canadian Pacific

Integration of North American oil and gas pipeline networks

Supply chains and economic integrationSource: American Assn. of Railroads.

Growth of container traffic: 1990-2008‘000 TEUs.

Vancouver LA / Pacific Montreal NY/NJ Atlantic Long BeachCoast Coast

1990 383.2 3,714.5 8,659.5 568.1 1,898.4 7,684.72000 1,230.0 9,480.2 17,372.8 1,014.1 3,050.0 13,042.42008 2,492.1 11,816.6 22,597.6 1,473.9 5,265.1 19,731.7

Source: American Association of Port Authorities, http://www.aapa-ports.org/Industry/content.cfm?ItemNumber=900 (20/10/10)

Canadian Ports by Cargo Tonnage, 2007thousands of metric tons

TOTAL TRADE INTERNATIONAL TRADE DOMESTIC TRADEPORTS (PROVINCE) TONS PORTS (PROVINCE) TONS PORTS (PROVINCE) TONS

1 Vancouver (BC) 81,442 Vancouver (BC) 80,182 Newfoundland Offshore (NF) 17,2102 Come-By-Chance (NF) 34,269 Port Hawkesbury (NS) 28,709 Come-By-Chance (NF) 15,8883 Port Hawkesbury (NS) 31,641 Québec/Lévis (QU) 22,221 Fraser River (BC) 7,0904 Québec/Lévis (QU) 26,606 Saint John (NB) 20,710 Thunder Bay (ON) 5,6525 Saint John (NB) 26,105 Montréal/Contrecoeur (QU) 20,397 Hamilton (ON) 5,6396 Montréal/Contrecoeur (QU) 25,577 Sept-Îles/Pointe-Noire (QU) 18,747 Saint John (NB) 5,3957 Sept-Îles/Pointe-Noire (QU) 21,433 Come-By-Chance (NF) 18,382 Port-Cartier (QU) 5,3278 Port-Cartier (QU) 20,035 Port-Cartier (QU) 14,708 Montréal/Contrecoeur (QU) 5,1819 Newfoundland Offshore (NF) 18,847 Nanticoke (ON) 11,438 East Coast Vancouver Island (BC)

4,57710 Nanticoke (ON) 13,038 Prince Rupert (BC) 10,465 Québec/Lévis (QU) 4,38611 Halifax (NS) 12,592 Halifax (NS) 9,922 Howe Sound (BC) 3,71312 Hamilton (ON) 11,531 Hamilton (ON) 5,893 Port Hawkesbury (NS) 2,93213 Fraser River (BC) 11,195 Port-Alfred (QU) 4,742 North Arm Fraser River (BC) 2,78814 Prince Rupert (BC) 10,465 Sault-Ste-Marie (ON) 4,423 Sarnia (ON) 2,77215 Thunder Bay (ON) 8,485 Baie-Comeau (QU) 4,384 Sept-Îles/Pointe-Noire (QU) 2,68616 Baie-Comeau (QU) 6,556 Fraser River (BC) 4,105 Halifax (NS) 2,67117 East Coast Vancouver Island (BC) 5,770 Thunder Bay (ON) 2,833 Clarkson (ON) 2,42518 Sorel (QU) 5,039 Sorel (QU) 2,796 Sorel (QU) 2,24319 Sault-Ste-Marie (ON) 5,003 Goderich (ON) 2,764 Baie-Comeau (QU) 2,17220 Windsor (ON) 4,850 Windsor (ON) 2,706 Windsor (ON) 2,144

Grand Total 468,624 333,737 - 71.2% 134,887 – 28.8%Source: American Association of Port Authorities ; http://aapa.files.cms-plus.com/Statistics/PORTSOFCANADA2007.pdf (20/10/10)

Sectoral Integration of Supply ChainsFood processing

Emergence of North America-wide food processing networkse.g. consolidation of beef processing industry in Alberta.

AutomotiveGeographic, ownership diversification of North American auto

sector before industry collapse, consolidation of 2008-09.Energy

Emergence of integrated North American production and distribution networks for oil, natural gas, electricity (enabled by regulatory changes, driven by price shifts: 1985-99).

Policy Challenges for Supply Chain IntegrationCapacity constraints

Growing port, rail bottlenecks, esp. on West Coast, major Great Lakes bridges

Cdn. Response: “Gateway Strategies” – major investments in port infrastructure, esp. Ports of Vancouver, Prince Rupert; Windsor / Sarnia Gateways (bridge twinning at Sarnia; plans for Detroit-Windsor Bridge)

Eased mildly by 2008-09 recession; substantial rebound in 2010.

Policy Challenges for Supply Chain IntegrationSecurity Bottlenecks

Major fears of post 9/11 WMD attacks lead to “thickening” of U.S. Borders

Policy Response: Smart Border Accord (Dec. 2001) coordination of security measures,

trusted shipper programs (FAST, etc.) with dedicated lanes at major border crossings, BUT . . .

Progressive decline in coordination after 2004, largely due to independent Congressional action (WHTI, Safe Ports Act, etc.)

Partial shift from “Just-in-Time” to “Just-in-Case” inventory management (Goldfarb, 2007).

Policy Challenges for Supply Chain IntegrationLack of strategic policy coordination on national

transportation and infrastructure strategiesSeparate national approaches in U.S., Canada, Mexico.U.S. initiatives dominated by log-rolling, earmarks for local

projects in Congress No policy capacity for cross-border coordination, with limited

project-based exceptions (e.g. Champlain and Blaine border crossings; St. Stephen-Calais bridge; Detroit-Windsor Bridge ... in progress)

Major cross-border initiatives driven by private sector independently of government (e.g. strategic partnerships in rail freight)